FIDICUARY RESPONSIBILITES PRESENTED BY NST- Roger Payne

1. FIDICUARY RESPONSIBILITES PRESENTED BY NST- Roger Payne

2. Vice-President Treasurer Executive Board Or individuals that make financial decisions or reviews for the Local Audit Committee Budget Committee Who Are The Financial Officers ?

3. Make the Financial Officer a financially savvy individual To keep the Financial Officers out of Jail !! Goals

4. A Local’s Financial Officer must have a strong sense of responsibility. He or she is entrusted by the Membership with the faithful performance of vital duties: Safeguarding the property of the Local and its Members Collecting and disbursing Local funds Accurately recording all financial transactions Reporting to Federal & State Government Agencies General Responsibilities

5. Local Officers manage and handle funds which belong to the Local and its Members, they hold positions of trust known as “Fiduciary Positions” These Federally-imposed Fiduciary Duties are set forth in Section 501 of the Labor-Management Reporting and Disclosure Act of 1959 (LMRDA), which provides that Union Officers must: Fiduciary Responsibilities

6. Fiduciary Responsibilities • Hold union’s money and property solely for the benefit of their Union and its Members. • Manage, invest, and disburse funds and property only as authorized by the Union’s Constitution and By-Laws or by proper resolution of its Membership. • Refrain from financial or personal interests which conflict with those of their Union; and account to their Union for any profits received from transacting Union business. • Union officials who violate these federally created fiduciary duties are subject to civil lawsuits in federal or state court for money damages or other appropriate relief. In addition, there are criminal penalties for embezzling or stealing Local property—fines up to $10,000, imprisonment for up to five years, or both.

7. AFGE Articles that Govern the Financial Officers AFGE National Constitution

8. Article II Section 3 • Independent Local • The Local is an autonomous organization. • Article IV Section 1 • Dues & Initiation Fees • Dues shall be established and adjusted as may be necessary to ensure that they allow adequate funds for the payment of Per Capita Tax and sufficient funds for the operating expenses of the Local.

9. Article V Section 4 Annual Audits In order for the bond to be effective, the Local shall file an Annual Audit Report (to include a copy of the DOL LM Form and an approved Annual Budget) with the National Secretary Treasurer (NST). Article V Section 5 Open Records All books, records, and financial accounts shall be open to the inspection of the National Executive Council or any duly authorized representative.

10. Conducting a Local Audit

11. Each local is required to conduct an Audit at least once a year and make a certification using Audit Certification Form 41 to the National Secretary-Treasurer showing that an audit has been completed. It is mandatory that you conduct an Audit: • At the close of each Year End • When there is a change in Financial Officers • Or, if there is a suspicion of any wrong doing AFGE Annual Audit

12. Who should be on the Audit Committee or conduct the Audit: Annual Internal Audit The President should appoint an odd number of members (3-5) that do not have signature authority on any accounts Annual External Audit You may hire outside Accountants or Bookkeepers to perform the audit also Monthly Audits by the Financial Officers AFGE suggests that the Financial Officers conduct an audit of the Savings, Checking, Investment and Credit Card Account Statements on a monthly basis to insure that all items have been reconciled. A review of the checkbook and dues deduction listings is also recommended Conducting Local Audits

13. Article VI Section 1(a)Local Officers The general officers shall be elected by the total Membership and shall constitute the Executive Board and shall consist of the President, Treasurer, Secretary and others as the Local’s bylaws may prescribe

14. Article VI Section 3 Presidents Duties The President shall be the executive officer of the Local. He/she shall exercise general supervision over the affairs of the local and insure that all other officers comply with their responsibilities and constitutional duties. Article VI Section 3Filling in for the President If the President is unable to perform his or her duties. The President will delegate the responsibilities of the office based on the local’s bylaws.

15. Article VI Section 5 Treasurer’s Duties The Treasurer shall maintain a Bookkeeping System as prescribed by the National Secretary-Treasurer. The Treasurer must make a financial report at each regular meeting; keep an up-to-date roll of the membership; make monthly membership changes (adds & drops); make address change and report such to the NST. Perform additional financial duties as assigned.

16. Article V Section 2 Check Signing The Treasurer shall sign and the President shall countersign checks covering proper expenditures for the Local. In the absence of these officers, such other Officers as defined by the Locals Bylaws, may sign. Article V Section 3 Bonding The Officers, agents, shop stewards, employees or other representatives of the Local who handle funds or property of the Local shall be bonded.

17. Article VIII Section 2 Executive Board Duties It shall be the duty of the Executive Board to devise and initiate actions that may be necessary in the interim between the Local’s meetings. All actions shall be subject to Local approval. Article VIII Section 3 Expenditures Expenditures by the E-Board in excess of $500 per month must have prior approval of the Membership, or be an approved budget item. Any expenditure authorized by the E-Board must be reported in writing at the next Membership meeting

18. Bonding Requirements

19. Bonding is a type of insurance policy that insures an organization against financial loss caused by persons who handle the finances for the Local. The insurance policy is called a “bond”—often a “security bond” or “fidelity bond.” Federal Labor Law requires bonding to protect Unions from financial losses caused by “fraudulent or dishonest acts” by Union Officers or Employees All AFGE Locals are covered under a blanket bond and charged annually for the coverage In order for your bond to be in effect you must conduct a Annual Audit and submit to AFGE a Form 41 with a copy of your LM Report and the approved Annual Budget. The Labor-Management Reporting and Disclosure Act (LMRDA) establishes specific bonding requirements:

20. A bond, like any insurance policy, has a maximum recovery amount. Per the Department of Labor the bond must be equal to at least 10percent of the assets the Local. A quick formula for computing required coverage: CurrentAssets (Cash, Investments) + Total Receipts * 10% = Amount of Coverage Required AFGE recommends that your coverage be 100% of your total assets. (LMRDA) Bonding Requirements

21. Article VIII Section 4 • Annual Budget • The Executive Board of the Local shall prepare an Annual Budget (subject • to the Membership's approval) insuring that revenues are sufficient to • meet its financial obligations.

22. What Agencies and Individuals must Financial Officers report to? Internal Revenue Service Your Local AFGE

23. IRS Requirements AFGE Locals are exempt from federal income taxes by the Internal Revenue Service by being a 501c (5) organization. AFGE’s Group Exemption Number is 0194. Generally AFGE Locals are not exempt from Sales Taxes. • Locals must pay employment taxes on salaries, lost time or annual leave reimbursements paid to their officers or members. The members receiving these types of payments must report the income and pay taxes. • Locals must report all income to the Internal Revenue Service whether it is taxable or not. The exemption from tax does not extend to all types of Local income. Certain types of income are taxable and must be reported to the IRS on form 990T.

24. When do I have to report to the IRS? For the year 2008 all Locals must file an "Annual Information Return" with the IRS. - If your gross receipts are greater than $25,000 but are less than $1,000,000 or your total assets are less than $2,500,000 you can file a 990EZ or a 990 - If your gross receipts are greater than $1,000,000 or your total assets are greater than $2,500,000 you are required to file Form 990 - If your gross receipts are less than $25,000 you can FILE a 990-N (e-postcard)

25. You must file the 990 or 990EZ Form by the 15th day of the 5th month, after your Local’s Year End. For a calendar year you will report on 5/15. A Penalty of $20 @ day up to $10,000 may be charged if the Form is filed late or an incomplete return is submitted. You can get an extension of 3 months by submitting an IRS “Extension to File Form” 8868 When are the Form 990’s Due ?

26. You can get the forms from the IRS Web Site at : http://www.irs.gov/formspubs/index.html When on the Web Site enter the Form you are looking for in the “Search Box” at the top of the screen. Example 990 or 990EZ or 8868 Where do I get the IRS Forms?

27. Remember the Local is an Employer when it makes payments to Officers, Stewards, Staff or others to perform duties or services for the Local: Salaries Payment for Lost Time (LWOP) Annual Leave Reimbursements Stipends When is the Local an Employer and when must you pay Payroll Taxes?

28. Here are several factors tending to indicate that an individual isan employee under tax law (only one need exist) : The member’s compensation is measured by the hour, week, or month rather than by the job. The member is required to perform the services personally, without the ability to delegate the task to somebody else. There is a continuing working relationship between the member and the Local. The Local supplies materials or facilities used by the member in performing the services, such as an office, office supplies, a telephone, etc. The Local provides instructions or training to the member; andthe member performs the services in question solely for the Local (and not for others). IRS’s Description of an Employee

29. Labor Department Reporting The LMRDA requires Locals to file an “Annual Financial Report” with the U. S. Department of Labor. If your Local has Gross Receipts of: • More than $250,000, you must file an LM-2 Report • Less than $250,000 and more then $10,000 you must file an LM-3 Report • Less than $10,000, you must file an LM-4 Report • DC Government Locals are not required to file a LM Report with DOL

30. The LM Forms are due 90 Days after the Local’s Year End If you are on a Calendar Year this is 3/31 If you are on a Fiscal Year, it is 90 days from the close of your Year End When are the Labor Department Reports Due?

31. The best place is the Labor Department Web Site at : http://www.dol.gov/esa/olms_org.htm Where do I get Labor Department Forms ?

32. The Financial Officers have a responsibility to keep the Membership informed of: All Income received by the Local (Dues and Other Income) All Expenditures and Payments made on behalf of the Local All Assets and Accounts held on behalf of the Local The creating and reporting of Budget items allocated by the Local Reporting to your Local Membership

33. Retention of Documents and Other Items Use of a Credit Card Completing the IRS 1099 requirements Making Loans to Members Other Areas for Consideration &Responsibilities

34. Retention of Documents and Other Important Items

35. General Local Files: By-laws and Amendments -------Permanent Correspondence -------------------5 Years Election Records-------------------2 Years beyond the term of office Local Memorandums of Understanding----------------------Permanent Minutes of Meetings--------------Permanent (Membership & E-Board) Items that Document the Local’s History --------------------Permanent Recommended Retention of Documents and other Items

36. Local Membership Records Dues Deduction Forms (1187, 1188, etc.) -------------3 Years EEO Case Files --------------------------------------------5 Years Grievance Case Files--------------------------------------5 Years (MSPB) Case Files ----------------------------------------5 Years Workers’ Compensation Case Files---------------------5 Years Financial Records Correspondence -------------------------------------------5 Years IRS Forms--------------------------------------------------5 Years LM Forms--------------------------------------------------5 Years Financial Statements & Reports---------------------- Permanent Officer Bonds ------------------------------------------- Permanent Many of these Retentions are mandated by the Department of Labor and IRS Recommended Retention of Documents and other Items

37. Use of Local Credit Cards

38. Local Credit Cards • How to avoid problems when using CreditCards : • Credit Cards should be in the name of the Individual Local Officer • Monthly dollar amount limits should be placed on Credit Cards • No ATM or Debit capability should be allowed • Credit Cards are to be used for Local business only. No personal charges by an officer. • A Credit Card Statement should not be considered authorization for payment—You must provide receipts, hotel statements, vouchers, etc. • Use of a Credit Card should be defined in the Local’s Bylaws.

39. Taxable & Non-Taxable Payments to Officers and Members

40. Business Related Expenses When: Expense is for union business Detail vouchers are provided showing: time, place, and business purpose Documentation is submitted in a timely manner Any unused funds are returned to the organization All 4 factors must be met or payment is Taxable Payments that are Not-Taxable

41. Officer Allowances When: Expense is for union business Expense vouchers are provided Documentation is submitted in a timely manner Any unused funds are returned to the organization All 4 factors must be met or payment is Taxable Payments that are Not-Taxable

42. Reimbursed Travel Expenses When: Expense is for union business Expense vouchers are provided showing: time, place, and business purpose Documentation is submitted in a timely manner Any unused funds are returned to the organization All 4 factors must be met or payment is Taxable Payments that are Not-Taxable

43. IRS 1099 Reporting

44. When non-payroll payments are made and exceed $599 annually for an individual or vendor What type of payments require a 1099: Membership Recruitment payments made to a member or officer Payments made for services performed by: Arbitrators, Accountants, Legal Services, Consultants Etc. Items or Equipment purchased for the Officers or Members i.e. personal cell phones, laptops Etc. When are you Responsible for Completing a 1099

45. 1099’s must be given to the Individual or Vendor by January 31st Copies of all 1099’s must be filed with the IRS by February 28th along with an Annual Summary (Form 1096) When Must I Complete the 1099

46. The Individual’s: Name Address Social Security Number Your Organizations Federal Tax ID (EIN #) The total amount paid to the Individual or Vendor Box 1- Rent, Box 6- Medical & Health Care, Box 7-Nonemployee Compensation and Box 14-Attorney Fees Note: Payments made through payroll are reported on IRS Form W-2 What must I Include on the 1099

47. Your Organization’s: Name Address Federal Tax ID (EIN #) A count of the total number of 1099s issued (Box 3) The total dollar amount reported for all 1099’s (from corresponding 1099 Boxes) Contact Name and Phone # Copies of all 1099s issued What must I Include on the 1096

48. Making Loans to Members

49. AFGE does not recommend making Loans to Members. Recovery of defaulted loans are costly and difficult. If you choose to make a loan remember the following: • They must be Approved by the Membership • The Executive BCANNOT Approve Loans! • A Loan cannot be more than $2000 per Individual. • For any Loan, there should be a very clear Standard Criteria that the Local has adopted. • Remember what the Local does for ONE member, you must do for ALL members. • All outstanding advances in excess of $2000 are considered by DOL as a loan.

50. Quick Books Pro Financial System The suggested approach for AFGE Locals and Councils is the AFGE Customized Accounting System through the use of Quick Books Pro